CONVERSATION W/ROBERT GORDON (PART 2): The BIG Payoff?
SUMMARY: based on the below conversation the following is possible from just this ONE DEAL, the Lifetime Learning Contract. Even if you reduce the numbers below by a ridiculous 90%, a case can still be made that TSIG is fundamentally undervalued by a lot at current levels.
Please read, think, and comment. If you disagree, let's hear why and you better make it good and convincing.
** 300M for TSIG in high margin business from card sales
** approx. $700M in lower margin CD/DVD/other business
TOTAL about $1 BILLION in revenues from this ONE deal
Before I start I want to make it clear that I have not been told anything of an "inside"
nature and this is the information I heard him say as accurately as I can portray it. I am
paraphrasing my questions and his answers. I am choosing to share my own DD and
you can choose to listen to it or not.
DG: Tell me about the time frame of MyMusicCard deals.
RG: It takes about 3 months to negotiate on average, 4 months to design the package
and particulars, and then there's the mailing to, and ramp up by the organization.
DG: I am especially intrigued by the Lifetime Learning Deal with schools. How
profitable could this one venture be? Let's ignore Future Leaders of America, Signature, Babe Ruth Youth Baseball, and others totally for now.
RG: I am extremely excited about it. It looks like the "buy-in" by schools will be large.
In fact we just got a call from the Chancellor of the City of Memphis that all schools
want to participate. But let me take you through a very conservative model we came up
with, so
you can see why I am excited.
Normally Lifetime Learning, who works with schools to put together fund raisers,
estimates an average of 30% participation by the students in these fund raising
programs. They have 70 years experience so they have a good handle on it. There are
50 million plus kids involved in 100,000 schools.
But for our model we are being very conservative. We are assuming only 10% student
paricipation, which is the lowest participation Lifetime has ever recorded. Average is
30% or so. This is especially conservative since they have already told us that the
interest schools are showing in out MyMusicCard program is already much better than
average.
***
DG: OK, in your model 10% of students will be marketing the MusicCard, which is 5.2
Million kids? (10% of 52 Million total kids)
RG: Yes, and Lifetime has found that the average student typically sells about $30-40
worth of the item (candy bars, etc), but we will say $20 (one to Mom and one to Dad,
for instance…..bare minimum.
DG: 2 MusicCards, ok.
***
RG: Now, with 5.2 MILLION kids x $20 per kid, that's about $100 Million in revenue
That's $50 Million for us and $50 Million for them. We have relatively low costs of
marketing (the initial packets and maintaining a website) and NO costs associated with a
sales force, so this is a great return for us and they are very happy too, for whatever
they are raising money for.
***
DG: So you have made bare minimum $50 Million Gross Profit, but if on the
AVERAGE 30% of students take part in the program and the average kid sells about
$40 worth of stuff, or 4 MusicCards, you make $600 Million … $300M for them and
$300 for us.
RG: Right, but I wanted you to see the very very worst case scenario. $300M is much
more likely or even more, since Lifetime is saying this is initially showing more interest
than any program they have done. I think teachers and students are tired of candy bars.
RG: Anyway, let's look at Part 2 of the revenue stream, the spending with the
MusicCard. Let's again be real conservative and say that only 10% of the people who
buy the MusicCard actually use it and when they do, they only buy 1 CD at $13 (after
shipping/handling).
DG: Again, really conservative.
***
RG: Yes. So we take the 10 Million Cards sold in our very conservative model and
assume only 10% or 1 million people use their card and only spend $13 a piece. That's
another $13 Million in revenue. Not real impressive but these numbers are very
conservative.
DG: But what is more likely?
RG: Typical research leads us to believe that about 30% of the cards will get used to
buy 3-4 CD's each (remember though it allows 20 CD's to be bought at reduced price,
so human nature may be to use buy more than that). If we also say that 30% of the kids
participate in the program who sell 4 cards each (expected average) then we have
another revenue of:
15 million kids x 4 cards sold per kid x .30 card used x $40 spent per card = $720
Million
DG: Give me a minute to get off the floor! LOL!
RG: Yes, and besides Babe Ruth, Future Leaders of America, other charities, etc., we
have also been working on another deal for many months that might kind of dwarf the
numbers of the Lifetime deal. It involves one Major National Charity who has 4
Corporate Sponsors with over 11,000 retail stores. It's been tough to get all sides to
agree, but we think it will happen.
DG: Well, if I was impressed before, I am staggered now. $300 Million in Revenues at
high margin and another $700 or so million at modest margin on ONE DEAL.
I kind of see why you were so anxious to get the PP money to make sure this happens
A.S.A.P.
***
RG: Well we are anxious to prove this whole thing to shareholders ASAP. It's been a
long road but we are almost there.
DG: Anything else?
RG: Well, I think our estimate of what it costs us to drive "eyeballs" to our website is
worth mentioning. Amazon pays as much as $50 per customer to drive them to their
site. We have a cost of a nickle or dime. We are going to drive people to our
E-Commerce site in huge numbers, we feel. You can let your mind see the value in
having massive amounts of people visit your site.
DG: Thanks for your time
RG: My pleasure
CONCLUSION (My thoughts)
I am not going to preach to anyone. But I hope those of you who have been whining,
simply sell if you don't believe. Your tired ramblings of the mistakes or delays of the past
are getting old.
Yes, the execution in the past has not always been prefect, and the delays have been
long, but the whole sales cycle is complicated. The potential deal mentioned above with
the 4 corporate sponsors and the large national charity, for instance, takes forever to get
everybody to agree. But isn't it worth the time if the revenue and profit potential is a s
big as it appears it can be?
I mean, we are talking possible revenues in the hundreds of millions or into the billions
over the next 12 months if the company executes, and net profits so high that an EPS of
up to $1.00 per share is remotely possible even with 100-200M shares outstanding.
YOU BELIEVE OR YOU DON'T....STOP WHINING, USE YOUR BRAIN, DO
YOUR OWN DD, AND BUY, SELL, OR HOLD. |
